A New Inconvenient Truth

November 17, 2008

In a New York Times op-ed published on the first Sunday after Barack Obama’s presidential election, Nobel prize winner Al Gore shifted from his longstanding focus on regulating carbon pollution to advocating direct government investments in clean energy as the best way to deal with climate change. Gore is the country’s most prominent spokesperson on climate change and a shift in his thinking in reaction to new economic and political circumstances is highly significant.

Of Gore’s five recommendations to President-elect Obama, the first four are for investment--in solar thermal plants, energy efficiency, a new electrical grid, and in electric cars--and only the final is for regulation, establishing a price for carbon. But even on this last point, Gore was far from aggressive, suggesting merely that the United Nations meeting to replace to Kyoto treaty in Copenhagen next year should result in countries agreeing to “invest together in efficient ways.”

This is a remarkable change from just a few months ago. In July, when he first called for 100 percent of America’s electricity to be from clean sources in ten years, Gore said, “Of course, we could and should speed up this transition by insisting that the price of carbon-based energy include the costs of the environmental damage it causes. I have long supported a sharp reduction in payroll taxes with the difference made up in CO2 taxes. We should tax what we burn, not what we earn. This is the single most important policy change we can make. “

In late 2007, when Gore accepted the Nobel Prize, he said, “Most important of all we must put a price on carbon .... this is by far the most effective and simplest way to affect solutions to this crisis.” And at the end of his 2006 movie, An Inconvenient Truth, Gore calls for fluorescent light bulbs, not new solar plants; hybrid cars, not turning Detroit into an electric car capitol of the world; and cap and trade regulations, not massive public investment in technology. In neither An Inconvenient Truth nor his Nobel speech did Gore make a single mention of the need for major public investments in infrastructure or technology.

With his op-ed, Gore has reversed the longstanding green lobby prioritization of regulation first and investment second. This reversal of priorities is crucial because cap and trade regulations, which would cap greenhouse gas emissions and allow companies to trade reductions, cannot work in the U.S.--and are not working in Europe. Clean energy alternatives remain prohibitively more expensive than fossil fuels. The result has been policymakers in Europe gaming the enforcement to avoid raising energy prices by very much. While Europe has established a price on carbon dioxide pollution of $40 per ton, that carbon price hasn’t stopped the continent from planning on building 50 new coal plants over the next five years.

Gore shifted because he knows that cap-and-trade, and most any new regulation, would raise energy prices--a political nonstarter during a recession. Taxing one part of the economy to invest in another, as cap-and-trade would effectively do, is not stimulus. By contrast, even the most conservative economists today believe that, in a period of serious recession bordering on financial collapse, the U.S. government should engage in deficit spending. Martin Feldstein, President Reagan’s famously supply-side economist, recently argued in a Washington Post op-ed that the federal government should invest $300 billion as stimulus. Many other economists think that number should be close to $500 billion a year for two years.

Thus, another important shift Gore made in his op-ed was his apparent embrace of deficit spending--rather than using money from auctioning pollution allowances--to fund these new investments. In his July speech, Gore said, “We’re borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the planet. Every bit of that’s got to change.” But now Gore appears to support the view that we should borrow money from China (and other foreign investors) to invest in clean energy.

We have long argued that it has been both a policy and political mistake for greens to place a higher emphasis on carbon prices and regulation rather than public investment in technology. The reason for this is simple: The order of investment and regulations matter. Investments aimed at making the technological innovations to reduce the price of clean energy alternatives should come first, as they are crucial to making future carbon regulations work. Moreover, these investments should not depend on being funded by the auctioning of pollution allowances. Gore’s shift shows what it looks like when greens go from rhetorical support for public investment as ancillary to regulating carbon to making it their central focus. Other environmental activists would be well-served by following his lead.

While he hasn’t completely let go of his apocalyptic rhetoric, which polarizes rather than unifies voters, Gore should be applauded for embracing an investment-first agenda. Some green leaders will no doubt privately accuse him of inconsistency, to which Gore could quote John Maynard Keynes, who replied to a similar charge by saying, “When the facts change I change my mind. What do you do, sir?”

Michael Shellenberger and Ted Nordhaus are the authors of Break Through: From the Death of Environmentalism to the Politics of Possibility and co-founders of the Breakthrough Institute.